Canada Dollar Touches Weakest Since August Before Policy Meeting

Oct. 22 (Bloomberg) -- The Canadian dollar touched the
lowest level against its U.S. counterpart in more than 10 weeks
amid speculation the Bank of Canada will put less emphasis at a
policy meeting tomorrow on raising interest rates.

The loonie, as the currency is nicknamed for the image of
an aquatic bird on the C$1 coin, fell versus a majority of its
most-traded peers. Central-bank Governor Mark Carney suggested
in an Oct. 15 speech that tomorrow’s economic forecast will
reflect a slow global recovery. Canada rejected on Oct. 19 a
C$5.2 billion ($5.23 billion) bid by Petroliam Nasional Bhd. for
Calgary-based Progress Energy Resources Corp.

“The statement may focus a little bit more on uncertainty
from slower growth abroad,” Sireen Harajli, a foreign-exchange
strategist in New York at Credit Agricole Corporate & Investment
Bank, said in a telephone interview. “Even though it may face
some short-term weakness, longer term we expect the Canadian
dollar to strengthen given its relatively better growth rates
and proximity to the U.S.”

Canada’s currency gained 0.1 percent to 99.22 cents per
U.S. dollar at 5 p.m. in Toronto. The loonie touched 99.65 cents
earlier, its weakest level since Aug. 10. One Canadian dollar
buys $1.0077.

The loonie weakened as oil, the nation’s biggest export,
fell. Crude-oil futures tumbled as much as 2.1 percent to $88.20
per barrel in New York, the lowest level in more than two weeks.

Canadian government bonds declined, pushing the yield on
the 10-year benchmark note up three basis points, or 0.03
percentage point, to 1.87 percent. The price of the 2.75 percent
securities maturing in June 2022 fell 26 cents to C$107.72.

Policy Meeting

Carney has kept his key interest rate at 1 percent for more
than two years and will probably leave it unchanged again at
tomorrow’s policy meeting, according to a survey of Bloomberg
economists.

The BOC chief’s speech a week ago omitted language he’s
used since April that raising interest rates “may become
appropriate” as Canada’s economy approaches full output. The
omission spurred speculation the central bank will remove the
phrase from its interest-rate announcement, which is scheduled
for 9 a.m. tomorrow in Ottawa. The benchmark rate won’t be
changed tomorrow, economists in a Bloomberg survey forecast.

“There’s an outlook of some softening in the bank’s
tone,” Shaun Osborne, chief currency strategist at Toronto-Dominion Bank, said in a telephone interview. “Comments from
Carney last week indicate that they will be shifting toward a
less hawkish bias.”

Technical Moves

The loonie is overbought and may depreciate to $1.0040 to
$1.0136 as part of a corrective phase, Niall O’Connor, a New
York-based technical analyst at JPMorgan Chase & Co. in New
York, wrote today in a note to clients. If the currency moves
below the 98.80 area, it could appreciate to 97.33 cents, its
strongest level in a month, he wrote.

Futures traders decreased their bets the Canadian dollar
will gain against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference
in the number of wagers by hedge funds and other large
speculators on an advance in the Canadian dollar compared with
those on a drop -- so-called net longs -- was 93,750 on Oct. 16,
compared with net longs of 95,628 a week earlier.

The loonie will trade at 98 cents per U.S. dollar by the
end of the year, according to a Bloomberg survey.